The Takeaway:

In this report, we analyze the likely outcomes of the years-long dispute between Dish Network Corp. (DISH) and the FCC regarding a basket of licenses important to two companies in the DISH family – Northstar Wireless (Northstar) and SNR Wireless LicenseCo (SNR), which DISH used as Designated Entities (DE) in Auction 97. As investors close to this issue know, the DISH/Northstar/SNR group recently amended their relationships in hopes of regaining a 25% discount (worth roughly $2.5B) on the licenses they previously purchased in Auction 97. Not only do we think this is unlikely but also we think the best-case scenario for DISH would be for the company to owe no additional payments to the FCC above and beyond what it previously paid related to Auction 97. A worst-case scenario, in our view, would be for DISH/Northstar/SNR to ultimately owe the FCC additional penalties up to $2.6 billion. Note that neither case would see the FCC granting DISH/Northstar/SNR ownership of a number of spectrum licenses on which the companies defaulted as part of this dispute. The final outcome between best- and worstcase is dependent on a subsequent auction of that basket of defaulted licenses. The next date to watch in this process comes on October 22, by which time DISH/Northstar/SNR group may reply formally to the FCC and competitor comments related to the dispute, and the companies may suggest further changes to their interlinked business structures.